12 August 2016 by

Lawyers to probe BHS transactions

The administrators for fashion chain BHS have brought in lawyers to examine the role its former directors played in the run-up to its highly publicised collapse this year, following its sale by Sir Phillip Green to Retail Acquisitions for £1.00.

Dominic Chappell, a shareholder and director of Retail Acquisitions, has been described in the media as a ‘serial bankrupt’ and Retail Acquisitions is alleged to have extracted £17 million from BHS in the period between March 2015 and the date of its collapse.

The administrators and their lawyers will be scrutinising the company’s transactions during the period when it was controlled by Chappell and Green, and specifically looking at whether any of the following took place, so as to determine if there is any way to ‘claw back’ money for the company:

Transactions at undervalue:

Any transfer of a company asset for no value or for significantly less value than the asset was worth. Administrators will look at any transaction in the 2 year period before the onset of insolvency.


Any transaction that puts a creditor in a better position than it would otherwise have been, in an insolvency situation. The administrators can look back at transactions that took place in the 6 month period before insolvency or, if the creditor is or was a ‘connected person’ (e.g. a director), they can look back at the previous 2 years.

Extortionate credit transaction:

The administrators will look at any transaction in the 3 year period prior to insolvency to assess if the terms of any loan or other credit required the company to pay exorbitant rates.

Avoidance of floating charges:

The administrators will look at any floating charge granted while the company was ‘insolvent’, or whether the company became insolvent as a result thereof, during the 12 month period prior to insolvency (or the 2 year period where the charge holder is a ‘connected person’).

Transactions defrauding creditors:

Any transactions entered into whereby any assets are sold for the purpose of putting them beyond the reach of the company’s creditors.

Wrongful trading:

Where a director concludes (or should have concluded) that there was no reasonable prospect of the company avoiding liquidation or administration, and did not take steps which a reasonably diligent person would take to minimise the potential loss to the company’s creditors, the Court can order the director to make a personal contribution.

Fraudulent trading:

If it appears that any business of the company has been carried on with the intent to defraud creditors, or for other fraudulent purposes, the Court can also order that anyone who was knowingly party to the fraudulent business make a personal contribution.

Misfeasance/ breach of duty:

Directors should also ensure they have complied with their duties to the company. Any failure to do so can lead to the Court ordering a personal contribution by the director(s) in question.

If you are a company director, you should think about the following measures to guard against the risk of these sorts of actions (in the event the company becomes insolvent):

  • Ensure all practices regarding board and shareholder meetings are followed properly, and that board meetings are held regularly;
  • Ensure that you have up–to-date financial information at all times; and
  • If you are concerned that there may be no reasonable prospect of the company avoiding insolvency, take appropriate professional advice as soon as possible.

For more information on insolvency disputes, please contact one of our solicitors in the Dispute Resolution team here.

29 July 2016 by

The future…..with or without EU

It was only a month ago that we were given the news “we’re out” and it is widely accepted and […]

5 August 2016 by

Conveyancing – what happens when you want to move home?

Whenever people ask what I do for a living and I answer “conveyancing” most people have no idea what that […]

Signup To Our Weekly e-News

"*" indicates required fields

We’ll never share your details with any third party in line with our privacy policy.